The Japanese Yen slipped against the US Dollar on Tuesday, with USD/JPY trading near 155.20 and rising for a second consecutive day, distancing itself from the roughly seven-month low reached last week [1]. This movement was driven by a firmer US Dollar, supported by a sharp surge in West Texas Intermediate (WTI) Oil prices, which climbed more than 3% on Tuesday. The increase in energy costs has fed directly into inflation expectations, pushing US Treasury yields higher and boosting the safe-haven appeal of the Dollar [1].
Market attention is focused on the upcoming Federal Open Market Committee (FOMC) decision scheduled for Wednesday. Market participants are leaning toward a 25 basis point rate hike to a range of 3.75%-4.00%, which would be the first increase after five consecutive holds. This decision coincides with the release of US Retail Sales data for August on the same morning. Recent firm labor figures, including a pickup in the ADP employment gauge's four-week average, have strengthened the hawkish outlook. A rate hike, especially if paired with guidance for further tightening, could extend the Dollar's recent gains [1].
The Bank of Japan (BoJ) is also set to announce its policy decision on Friday, with markets widely expecting a rate hike to 1.25%. Strong Japanese wage and growth data have reinforced these expectations, and speculative positions against the Yen have been reduced since the summer's intervention [1].
From a technical perspective, USD/JPY is trading at 155.18, maintaining a bullish near-term bias as it remains above the 20-period Simple Moving Average (SMA) at 154.37. Immediate resistance is noted at 155.22, with a broader trend cap at the 100-period SMA near 156.92. The Relative Strength Index (RSI) around 62 indicates firm positive momentum, suggesting that dips may remain supported while the price stays above the short-term average [1].
CONCLUSION
The Japanese Yen's decline is being driven by rising oil prices and higher US yields, with both the Federal Reserve and Bank of Japan policy decisions in focus this week. Market sentiment remains cautiously bullish for USD/JPY, with technical indicators supporting further upside if resistance levels are breached.